Spongetech Delivery Systems, Inc. (fka SPNGQ)

[Christy from Google]

HH, I reviewed the 10Q again.

IMO, at least $10 to 15 MIllion was transfered between Dicon and SPNG from Mar 1st to July 9th. This relationship was disclosed by Mosky in the 10Q. Its a "oral" agreement.

The Feb 2009 BS indicates "Deposits on Inventory production" was $2,825,037. This inventory production would have to be observed and various auditing procedures done on May 31st, 2009 (per GAAS). Maybe a day before or after, but in either case, a real live CPA would have to be present at the Dicon production/wharehouse facilities to perform auditing procedures on this WIP/FG inventory on May 31st. This wasn't done, and thus R&H have a "scope limitation". R&H has to roll back the June and July intercompany inventory activity, to arrive at a reasonable May 31st Inventory balance. Throw in the requirements of SFAS 165 and 141, the scope limitation, the Dicon purchase and you have a real auditing nightmare.

But what the real problem is, the need for a 250K LC on July 9th to help finance Dicon activities. What the hell happen to the $10 to 15 Million that was advanced since Feb 28th. IMO this is what MOSKY is hiding. The Dicon fick-up, and the resulting write-off.

Thus the reason for a 2nd opinion, via the D&T interview. process.